Oil industry pumps up oyster farms

For some people who lease oyster beds from the state, their property can be worth more dead than alive.

Ironically, the money comes from one of the Louisiana oyster farmer's oldest foes: the oil industry, whose canals channeled damaging salt water into oyster grounds.

Since 1944, when the Louisiana Supreme Court ruled farmers were entitled to compensation when oil company pollution killed their oysters, a body of law has developed making it difficult for oil and gas companies to ignore the damage they do when their pipelines leak or their rigs strike an oyster reef.

Today, most oil companies would rather write a check than litigate, according to industry experts. On average, oil and gas companies shell out an estimated $5 million each year to oyster farmers for the right to conduct operations on or near their leases. That's equivalent to one-fifth of the entire Louisiana oyster crop, records show.

Detective work

Leaders of the state's oyster industry don't dispute those figures. But they say that's a small price to pay for the protection they provide to the state's fragile coastline as an oil-industry watchdog. State officials agree.

"Even if there is a lot of money flowing there, this is a good system, because you have checks and balances on an industry that is doing some damage," said John Roussel, assistant secretary of the Louisiana Department of Wildlife and Fisheries. "The oyster-leasing system predated any kind of coastal management in Louisiana. And if the leasing system was not there when oil and gas exploration first started, there might have been a lot more damage back then."

Still, oyster industry leaders acknowledge, oil companies have become such easy pickings that many people now take out oyster leases with no intention of ever harvesting oysters.

It's not hard to see the attraction. Under state law, an oyster lease rents for $2 an acre. The average lease is 48 acres, which means most oyster farmers pay less than $100 a year for a lease. Though the law once required lessees to cultivate oysters on at least 10 percent of their acreage, that requirement never was enforced and was dropped several years ago.

Leaseholders' market

One of the main sources of cash involves seismic testing, in which an oil company sets off an air gun or explodes a charge of dynamite on the water bottom and then records the vibration to locate oil-rich salt domes below the earth.

A leaseholder usually gets $250 for each seismic shot, and seismic companies sometimes shoot 50 to 100 charges per lease, said Don DuBose, who oversees seismic activity in southern Louisiana for Western Geophysical.

To avoid the headaches of filling out a lease application, which often takes years for the state to process, some speculators attend state auctions. In 1989, for instance, 50 people showed up to bid on 3,170 acres that were repossessed by the state for non-payment of rent, an indicator that the leases were no longer good for oysters. That didn't deter Vicky Culkin and her boyfriend, Ned Malley Jr., who bid on several leases.

"Last year, my boyfriend made $2,300 off a $325 lease," Culkin said at the time. "He never even pulled up one oyster -- he never even saw it."

For some, the checks they receive from oil and gas companies generate more money than what they earn from their oyster business, tax records show.

For instance, Albert Avenel Jr., who has been harvesting oysters and shrimp in Breton Sound for 25 years, was paid $50,000 by several oil companies between 1995 and 1997 for the right to operate on his leases, tax records show. That's just $1,000 less than his total sales for the period, and three times the actual profit he earned from his oyster and shrimp business.

Avenel acknowledged that he didn't have prove the oil companies did any damage to his leases to get the money. In fact, he said the leases hadn't produced oysters since 1993.

"Some oil companies have taken the position that they will pay for a small amount of piracy to avoid a large amount," said attorney David Culpepper, widely considered the most experienced defense lawyer in town when it comes to oyster lawsuits. "So they hand over money, hand over fist, not knowing it screws up the system for everybody else."

Of course, farmers can't depend on that money. In some cases, years can go by before an oil company will set up shop near a farmer's lease. But sometimes, the windfalls are enormous, according to a review of several hundred tax returns submitted as evidence in suits filed against the state by oyster harvesters over the Caernarvon diversion project.

Pearly empire

Consider Ken Fox, whose family controls more oyster beds than anyone else in Plaquemines Parish. Even as far back as 25 years ago, Fox said, his family was earning $30,000 a year from the oil companies. He said he used that money to build his empire, socking it away in an escrow account until he found more oyster beds to acquire.

"That way we didn't have to pay taxes on that money," he said.

But in 1998, Fox testified in court, "a miracle happened." A seismic company came through Breton Sound and looked for oil on virtually every lease he had. By the end of the year, the company had paid him $411,000 -- almost four times more than the profits from his best year as an oyster farmer, tax records show.

"That was like a gift from heaven," said Fox, a millionaire who still lives in a double-wide trailer in Braithwaite.

To avoid paying huge sums of money to oyster farmers, some oil companies have started taking out their own oyster leases. BP America, which is preparing to build an $80 million pipeline through south Louisiana, applied for 4,000 acres of oyster leases along the route to reduce the potential impact zone.

"Rather than let those become a target for somebody who might try to take advantage of the situation, we actually went out and applied for the leases on those blocks," said BP executive David deGruyter, who oversees the company's dealings with oyster farmers. "That way, we can hold them until our pipeline is put in, and then we can relinquish them."